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How are asset managers preparing for Solvency II?

Survey findings: Solvency II and asset management

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Asset managers are bullish on prospects for winning more insurance business from Solvency II, and should be taking the lead in initiating a strategic process.

The encouraging news is that almost one third of respondents have been engaged by most of their insurance clients around Solvency II. However, many asset management firms are not taking a proactive strategic approach and are not in regular dialogue even at this relatively late stage.

Twenty five percent of our respondents said that more than 90% of their insurance clients had yet to engage with them on Solvency II planning and requirements. If the insurer is not demanding a response to Solvency II, the asset manager is not initiating a program.

One third of asset managers are without a clearly defined strategy for Solvency II. This is reflected in the lack of revenue targets.

Only 5% of respondents have a set target for additional fees that could be generated as a result of Solvency II and 16% will levy a one-off charge for additional products and services, and a similar proportion have agreed to increase fund or management charges.

The positive news is that two-thirds of asset managers have a strategy. The implication that programs are underway is counterbalanced by the fact that most knowledge is held within the Solvency II teams.

Low awareness of Solvency II among asset management firms may mean missed opportunities to react quickly and strategically. This could impact how the company aligns Solvency II with other regulatory programs under way that may have a potential overlap.

The top three functions where Solvency II will have the greatest impact are:

Client reporting

Data management

Product development

We expect to see other challenges gain prominence, such as loss of intellectual property. The speed with which asset managers have to submit data to insurers under Solvency II effectively means that the insurer can potentially replicate the portfolio the asset manager is managing.

As a consequence, most asset managers are concerned about providing look-through data within such a short timeframe.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.